Bond fund dropping US Treasuries.

[Guest guest]

What this fellow is saying is that the US bonds are junk. They are undervalued because of the level of national debt and how much more is being piled up. What that means is that confidence in the dollar and the US government is dropping and this is a bad thing.

The government is really holding it together right now by accounting gimmicks and smokescreens. It has been buying its own debt to allow the rampant spending to continue. This won't last much longer. Interest rates are going to have to go up before long either when the Fed finally does it on its own or it is forced by ratings agencies downgrading the US bond rating.

As I've said before, the interest rate should be much higher than it is. Before the Fed, this was how excess capital was removed from the economy. Instead, what is happening now is there is this continuing splurge of funny money that is ending up in the hands of a relative few. Now, they might think that is great, but in reality it is tearing down the economy for the vast majority of people. It is also creating several new bubbles as the few try to find new ways to generate more funny money profits and lock in what they have. This is why you hear about them have $50,000 lunches and buying up ever bigger yachts and planes. There simply aren't the productive assets to put that money into like businesses and such.

I also think that the spike in gold prices is one of the bubbles, as are some other commodities. The commodities market is the only market they haven't managed to raid yet. They've raided the stock market several times and I believe there is yet another bubble being built up now for a final pillaging. If they get the commodities market, that will have a much wider effect since it can affect farmers who rely on the boards to get decent prices. If they get hammered because of commodities looting, then they could lose farms and we'd all be in trouble. It might not be that bad, but it remains to be seen just what the speculators do to the commodities.

http://www.bloomberg.com/news/2011-03-09/gross-drops-government-debt-from-pimco-s-flagship-fund-zero-hedge-reports.html

Quote:

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits.

Pimco’s $237 billion Total Return Fund last held zero government-related debt in January 2009. Gross had cut the holdings to 12 percent of assets in January, according to the Newport Beach, California-based company’s website. The fund’s net cash-and-equivalent position surged from 5 percent to 23 percent in February, the highest since May 2008.

Yields on Treasuries may be too low to sustain demand for U.S. government debt as the Federal Reserve approaches the end of its second round of quantitative easing, Gross wrote in a monthly investment outlook posted on Pimco’s website on March 2. Gross mentioned that Pimco may be a buyer of Treasuries if yields rise to attractive levels.

Treasury yields are about 150 basis points too low when viewed on a historical context and when compared with expected nominal gross domestic product growth of 5 percent, he wrote in the commentary. The Fed is scheduled to complete purchases of $600 billion of Treasuries in June.

[Guest guest]

" What this fellow is saying is that the US bonds are junk. "

Well, maybe they are and maybe they aren't. If the bonds are being dropped

because the holders aren't convinced of the government's ability to pay the debt

back, then the bonds are junk. But right now, the yield is so low on them that

people wouldn't want to buy them if the fed raises interest rates, and so THAT

may be why they are selling. They are selling them in anticipation of the fed

raising interest rates so that other saps can lose money and not them.

Technically, bonds are supposed to be a long term investment. You are supposed

to hold them to maturity, but if you are an investor, you hold them as a

commodity. They are selling them because they anticipate either that the

government will not be able to pay on them, or else because the commodity is

soon going to be worthless when other bonds with a higher yield come on the

market.

Whenever the fed raises rates, low yield bonds are like what oil would be if

everyone converted to hydrogen to fuel cars. Worthless.

Administrator

[Guest guest]

What the government has been doing over the last 15 years or so is to have been putting out short-term treasuries that have a cycle of a couple of years instead of the long term ones. This was done to keep the cost of financing the debt lower because of the lower interest rates. However, the risk was the rates would climb and higher interest rate bonds would have to be bought to replace the expiring low rate ones.

Perhaps that is one reason the Fed and Treasury are trying to hard to keep rates low.

Whatever the case, it won't last forever. When the bill comes due its us Kulaks who are going to get hammered.

In a message dated 3/10/2011 3:09:08 A.M. Eastern Standard Time, no_reply writes:

Technically, bonds are supposed to be a long term investment. You are supposed to hold them to maturity, but if you are an investor, you hold them as a commodity. They are selling them because they anticipate either that the government will not be able to pay on them, or else because the commodity is soon going to be worthless when other bonds with a higher yield come on the market.

[Guest guest]

What the government has been doing over the last 15 years or so is to have been putting out short-term treasuries that have a cycle of a couple of years instead of the long term ones. This was done to keep the cost of financing the debt lower because of the lower interest rates. However, the risk was the rates would climb and higher interest rate bonds would have to be bought to replace the expiring low rate ones.

Perhaps that is one reason the Fed and Treasury are trying to hard to keep rates low.

Whatever the case, it won't last forever. When the bill comes due its us Kulaks who are going to get hammered.

In a message dated 3/10/2011 3:09:08 A.M. Eastern Standard Time, no_reply writes:

Technically, bonds are supposed to be a long term investment. You are supposed to hold them to maturity, but if you are an investor, you hold them as a commodity. They are selling them because they anticipate either that the government will not be able to pay on them, or else because the commodity is soon going to be worthless when other bonds with a higher yield come on the market.